THE REACH OF WAR: BUSINESS; Merchant Class Casts Lot With New Iraq For Now, Despite Physical and Fiscal Risks

By SABRINA TAVERNISE

Published: September 12, 2004

His home was hit by mortar fire in the American invasion. A car packed with explosives hit his restaurant on New Year's Eve. More than 10 of his friends have paid thousands of dollars to kidnappers.

But Nabil Hanna, 41, also a clothing retailer, has no plans to leave Iraq, even though he could. (This month, he will go to Italy to buy a collection for the new season.)

The transition to a new Iraq has been hazardous for poor Iraqis, caught up in the chaos and insurgency of the nation. But members of Iraqi's merchant class face risks of their own. They are targets for kidnappers. Robbers roam their cargo routes. Their lives have narrowed to speedy commutes between offices and homes. Many wonder if the danger is too great for them to stay.

Yet so far, some entrepreneurs like Mr. Hanna are deciding not to give up. The chaos is their new life, and many are learning to adapt.

''Sometimes I am thinking to leave my country,'' he said on a recent Wednesday in his Baghdad shop. But, he added: ''I am Iraqi. I am respected here. My dream is here, not in another country. So I will wait to see what will happen.''

Iraq's merchant class declined precipitously under Saddam Hussein, as the state slowly took control of trading, and wars consumed much of the country's resources. By the 1990's, the state had become the single largest employer, with more than 200 state-owned companies.

The revival of a business class is crucial to the American campaign to help Iraq become stable and prosper. It would help liberalize the state-dominated economy, the Americans say. The establishment of legal rights could give owners the confidence to invest, and create a building block of democracy.

But so far lives have been twisted into strange shapes. Abdul Wahed Hashim, an importer based in Baghdad, said he switched cars several times a week and slept in different homes to avoid kidnappers.

''It is not a life,'' said Mr. Hashim, 40, who agreed to meet in a cafe because he did not want a foreign reporter to be seen at his office. ''At least the prisoner stays in one place with a guard outside. We are always moving, and only God is watching.''

In a defense against kidnapping, business owners have begun moving their families to safer nearby countries. Mr. Hashim moved his wife and four children to Syria three months ago, after his 10-year-old nephew was seized. He was released after a ransom was paid.

One result is a reverse of what life was like under Mr. Hussein, when Iraqi men sought to leave to earn hard currency for families at home, said Ihsan al-Septi, who owns a jewelry store in central Baghdad, and whose family will soon move to Syria. ''We are strangers in our own country,'' Mr. Septi said Tuesday at his bustling shop. ''Death is like our shadow; it is living with us.''

That movement can be seen in a figure released by the Migration Ministry of Iraq last month. The government estimated that 40,000 Christians have left Iraq since the American occupation began last year. Christians are a small fraction of Iraq's population of 25 million, but the figure has some significance because a vast majority of Christians own businesses.

Security concerns cross from personal into professional lives. Mr. Hanna's restaurant remains shuttered, its blank facade a grim reminder of the attack that killed four people on New Year's Eve. Restaurants elsewhere in Harthiya neighborhood in Baghdad were nearly empty at 8 p.m. on a recent night. Before the war they would have been full, said Muhammad Farook, a manager at Coconut, a 200-seat burger restaurant with a handful of diners.

Part of the problem is frequent power failures, said Omar Mufeed, a fast-food restaurant owner, who bought a second generator. Though his restaurant is as bright as a Christmas tree, the roads to it go dark when the power fails.

''Electricity is life in Baghdad,'' Mr. Mufeed said. He said that he had bought a Kalashnikov assault rifle for protection, but that the only time he used it was to fire in celebration when the Iraqi soccer team beat Australia in the Olympics.

Still, some businesses -- primarily sellers of consumer goods -- are prospering. Vast numbers of public sector employees earn up to 100 times the few dollars they received each month under Mr. Hussein.

Air-conditioners are selling quickly. Cars and jewelry are also selling well. Mr. Septi said he sold about twice as much as before the war.

''Three months ago people started buying,'' he said, while two women negotiated with a salesman for a $948 pendant on a gold chain. The buying, said Mr. Septi, 41, recalled a spree in the 1970's, a more peaceful and prosperous time in Iraq.

Another aspect of Iraq's economy that is encouraging business owners is the value of land and property. A spurt of buying when expatriate Iraqis returned fueled a mini-boom after Mr. Hussein fell. The price of a square meter of floor space, almost 11 square feet, jumped fourfold, to $1,000, said Assan al-Shamari, a real estate broker in Baghdad. It has since dropped to $800.

Mr. Hanna has temporarily closed his clothing factory and sold a women's clothing store, but he is not, he emphasized, selling his land.

The biggest profits come from government contracts. Those benefiting are mostly larger, well-connected companies, though small ones have profited, too, with the unusual opportunities and perils of the times.

Consider Mr. Hashim, who owned a small business importing soap before the war. A lucky moment in the Ministry of Trade after the Hussein government fell landed him a fistful of contracts, some for more than $1 million, importing food, water pumps and other items. His profits, he estimates, are five times what they were for his soap business.

But the business uses truck convoys from Jordan and Syria, traveling one of the most dangerous roads in Iraq. Mr. Hashim, a compact man with deep lines in his tanned face, uses his passionate anti-Americanism, family connections in Falluja, the stronghold of the Sunni insurgency in Iraq, and force of will to get the trucks through. Security is provided by three groups along the route and has to be negotiated with a new provider each time to reduce the chances of ambush.

The convoys have been attacked twice. Once by thieves (a simple transaction in which Mr. Hashim paid $20,000 for the release of eight trucks) and once by Islamists (a more complex negotiation, in which he sought help from a local sheik).

Ali Abdul Karim, a trucking company owner, said the attackers posted a man who poses as a soda seller at the border. He watches the traffic and uses a satellite phone to report.

Most business owners interviewed for this article were relieved that Mr. Hussein had been removed. But they also fondly recalled the days when the appetite for bribes among state officials was kept in check by Mr. Hussein's fearsome system of control. Mr. Abdul Karim said that for a recent 100,000-ton shipment of sugar, he paid a ministry official $2 per ton.

''Before, they were afraid,'' he said. ''But now they ask officially.''

Mr. Hanna spends the afternoons in his shop. Business is slow. He likes talking politics over Arabic coffee. Iraqi government officials are all part of a giant chess game, competing for the places closest to power. He, on the other hand, is planning a shopping center. He has the land, but the center is only an idea.

''No new investment until we see what will happen,'' he said. ''I want to see people coming back to Iraq, foreigners coming, businesses opening up.''

''I don't want to leave,'' he added. ''Believe me.''

Photos: Ihsan al-Septi, right, at his shop in Baghdad, said was selling about twice as much as he had before the war.; Nabil Hanna, left, of Baghdad, who runs a store and a restaurant, said he won't leave Iraq though explosions had hit his business and home. (Photographs by Lucian M. Read/World Picture News, for The New York Times)